Two plus two really does equal four: simulating official BLS gasoline price measures

Gasoline prices are a major contributor to inflation and have exhibited significant volatility over the last 3 years. Several price series of the U.S. Bureau of Labor Statistics (BLS) track changes in gas prices throughout the supply chain from oil extraction to gas stations. This article uses novel statistical methods that simulate these BLS price measures along the gasoline supply chain to demonstrate their internal statistical consistency and to better understand the impact of gas station markups on gasoline inflation. The statistical results of this article show that BLS price measures are accurately simulated by statistically backing-out each index from its respective supply-chain counterparts. Additionally, this article shows that gas station markups may have had a modest inflationary impact over the course of the COVID-19 pandemic. Gasoline prices are a major contributor to inflation and have recently exhibited significant volatility.1 Several price series of the U.S.